HSA and FSA: how a therapy surface becomes an eligible expense

What the rule actually says

IRS Publication 502 defines deductible medical care by reference to amounts paid for the "diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body". That language, from Internal Revenue Code §213(d), is the test everything else hangs off. An expense that meets it can be an eligible medical expense; an expense that does not, cannot, regardless of how genuinely useful it was.

Notice what the test is about. It is not about the object. It is about the purpose the object is being put to, for a particular person, for a particular condition. That is why the same item can be an eligible expense for one household and ordinary bedding for another, and why the question a reviewer is really asking is "what is the documented medical purpose here".

It is also why a seller cannot answer the question. We know what the equipment is. We do not know the diagnosis, we are not treating anyone, and we have no standing to assert a medical purpose. The clinician has that standing, and the administrator has the authority to accept or reject it.

The dual-purpose problem, in plain terms

Eligibility lists work well for things with no ordinary use. Nobody buys a wound dressing for comfort. A mattress is the opposite case: it is a normal household object that almost every home already contains, and a therapy surface is still, to the administrator's eye, a mattress until something in the file says otherwise.

So a therapy surface falls into the category administrators call dual-purpose, or sometimes potentially-eligible-with-documentation. The item is not excluded. It simply does not carry its own justification, and the justification has to arrive separately, from someone qualified to give it.

This is not a loophole or a workaround, and it should not be treated as one. It is the ordinary way the rules handle an item that can be either medical or not depending on the circumstances. Treated straightforwardly — clinician documents the need, invoice describes the item, administrator reviews — it is a normal process. Treated as something to be got around, it produces exactly the sort of claim that gets pulled for review.

What a Letter of Medical Necessity generally contains

The letter is the clinician's document and its exact form is up to them and to the plan. In general, an LMN identifies the patient and the clinician, names the diagnosed condition, names the specific item, explains why that item is needed for that condition, and states an expected duration of need. Some administrators have their own form; if yours does, use it, because a reviewer reading a familiar form works faster than one reading a letter.

The two elements most often missing are the link and the duration. A letter that names a condition and names an item, but does not explain why this item for this condition, leaves the reviewer to make the connection themselves, and reviewers do not. A letter with no duration leaves an open-ended claim that has to be re-justified every time, which is a particular problem for rentals.

Give the clinician the exact configuration name and the confirmed specifications so they are not writing from memory. That is a real service we can perform and it is the limit of our involvement in the document.

• The patient, and the clinician's name, credentials and contact details
• The diagnosed condition, named specifically rather than by category
• The item, named as the manufacturer names it, not as a generic description
• Why this item is needed for this condition — the link, stated explicitly
• The expected duration of need, especially where the item is rented
• The date, and a signature the administrator can verify

Substantiation, and the thing people get wrong about benefits cards

A benefits card swipe at a merchant is not substantiation. It is a payment. Many administrators auto-substantiate small, obviously-medical transactions at recognized merchants, and that convenience leads people to assume that a paid transaction is a settled one. For a large durable medical equipment purchase it very often is not, and the request for documentation arrives weeks or months later.

What happens then depends on the plan. Typically the administrator asks for the itemised documentation; if it is not produced, the amount can be treated as unsubstantiated, which for an FSA can mean repayment or an offset against future claims, and for an HSA can mean the distribution is not a qualified one. None of that is catastrophic if you have the paperwork. All of it is unpleasant if you do not.

So keep the itemised invoice and the Letter of Medical Necessity together from day one, and assume they will be asked for. That is the whole of the advice, and it is the part people skip.

HSA and FSA are not the same account

They are often mentioned in the same breath and they behave differently. A Flexible Spending Account is an employer-established account, generally tied to a plan year with a deadline for incurring or claiming expenses, and with carryover or grace-period rules that the employer selects from what the plan allows. A Health Savings Account is the individual's own account, paired with a qualifying high-deductible health plan, and the balance carries forward and stays with the person rather than with the job.

The eligibility test for an expense is the same for both. The timing consequences are not. With an FSA, a deadline can make a purchase that would be eligible in April ineligible in January of the following year, and that is a real consideration when a discharge date is moving. With an HSA, there is no deadline pressure, but the account holder carries the record-keeping responsibility for as long as the rules require.

Contribution limits, carryover amounts and deadlines change from year to year and are set by rules we are not qualified to interpret for you. We have deliberately published no figures here. Ask the administrator, or a tax professional, for the numbers that apply to your account this year.

Where this sits next to the other funding routes

An HSA or FSA is not insurance and is not a payer. It is your own money, with a tax treatment attached, and it applies to an expense you have decided to incur. That makes it the natural funding route for equipment that no payer covers — which, for fluid immersion simulation, is the situation. There is no HCPCS code for the technology and we do not bill any payer, so a Dolphin FIS surface is bought or rented privately, and an HSA or FSA is one of the ways households do that.

It also means the sequencing matters. If a covered Group 2 surface through an enrolled supplier would meet the clinical need, that route should be exhausted first, because spending your own tax-advantaged dollars on something a payer would have covered is a poor outcome. We would rather say that here than have it occur to you afterwards.